Comments on state aid for Hinkley Point C

This is a slightly revised version of a letter that was sent to the European Commission (Directorate General for Competition) on 2014-03-23.Dear Commissioner Almunia,

State aid SA.34947 (2013/C) (ex 2013/N)—Investment Contract (early
Contract for Difference) for the Hinkley Point C New Nuclear Power
Station: Invitation to submit comments pursuant to Article 108(2) of the
Treaty on the Functioning of the European Union

This is a response to the recent invitation to submit comments about
possible state aid for the proposed new nuclear power plant at Hinkley
Point in south-west England. It is a revised and updated version of our
Open Letter, which we sent you in December 2013, which may be seen
online with its 47 signatories via bit.ly/1bpwTwc, with 110 letters of endorsement at bit.ly/OH5xtB.

The proposed "Contract for Difference", mentioned in the title of the
invitation to submit comments, would not be a subsidy for nuclear power
if the reference price for electricity were to be generally higher than
the strike price. But with the Hinkley Point proposal, this is very
unlikely to happen. The prices of electricity from onshore wind farms
and photovoltaics are already approaching the current market price for
electricity in the UK and both of them are likely to become cheaper in
the future. Costs for other renewables are also falling. Thus the strike
price of £95.50 per MWh agreed for the proposed Hinkley Point
project—about twice the current market price for electricity and
index-linked for the 35 years of the contract—is likely to result in a
very large subsidy for the plant throughout those years. At the very
least, the scheme will artificially reduce the cost of borrowing for the
project.

But the contract for difference is just one of several subsidies that would be available to the Hinkley Point project. Others are:

Loan guarantees from the UK government.

Seven existing subsidies for nuclear power, described in "Nuclear Subsidies" (PDF, bit.ly/1bSgGhx). One of the largest of these is the cap on liabilities for nuclear disasters.

There is no valid justification for any of these subsidies for nuclear power.
They divert resources from other options that are altogether better and
cheaper. For reasons given below, they are bad for energy security, bad
for the fight against climate change, bad financially for consumers and
taxpayers in the UK, and bad for the development, throughout Europe, of
the good alternatives which are ready to go, cheaper than nuclear
power, and very much quicker to build.

Here are the main reasons:

Nuclear power is a mature technology that should not require any subsidy. Subsidies are for newer technologies that are still finding their feet commercially.

Contrary to what the UK government suggests, nuclear power is a hindrance, not a help, in ensuring security of energy supplies:

Like all kinds of equipment, nuclear power stations can and do fail.
Failure of a nuclear power station is normally very disruptive on the
grid because a relatively large amount of electricity is lost, often
quite suddenly and with little warning. For that reason, it is necessary to provide backup for nuclear power stations---backup which is called the "Large Loss Response" (see "Exclusive: Will wind farms pick up the tab for new nuclear?", Business Green, 2010-08-24, bit.ly/1zG1l3K).

By contrast, variations in the output of renewables are much easier
to manage because they are gradual and predictable. There are several
techniques for managing that kind of variation and also variations in
the demand for electricity (see bit.ly/I4E5vr). The supposed problem of intermittency in renewables is overplayed.

Nuclear power lacks the flexibility needed for balancing supply and demand on the grid.

Contrary to popular belief, nuclear plants are not "always on",
24/7. Apart from unscheduled failures, nuclear power stations often
operate at reduced capacity or are taken out of service for routine
maintenance.

Contrary to what the UK government suggests, Nuclear power is a poor means of plugging the supposed "energy gap" or "keeping the lights on":

Nuclear plants are notoriously slow to build: they can take 17 years or more to complete. (see bit.ly/1a7idjS, p. 4).

In general, renewables can be built very much faster.

There is good evidence for a superabundance of renewable sources of energy (see bit.ly/9MKP5i).

There are now many reports showing how to decarbonise the world's economies without using nuclear power (see bit.ly/wRQ8ro).

Contrary to what the UK government suggests, Nuclear power is a poor means of cutting emissions. Peer-reviewed research shows that the nuclear cycle produces between 9 and 25 times more CO2 than wind power (see bit.ly/1afpW06). Other renewables also have much lower emissions than nuclear power.

Contrary to what the UK government suggests, nuclear power
is, taking account of all subsidies, much more expensive than the clean
and safe alternatives, and likely to remain so in the future:

Withdrawal of just one of the present subsidies for nuclear
power (the cap on liabilities) would raise the price of new-build
nuclear electricity to at least £200 per MWh,
substantially more than the unsubsidised cost of offshore wind power
(about £140 per MWh and falling), itself considered to be one of the
more expensive kinds of renewable energy (see bit.ly/KisjOT).

The cost of renewables is falling. Greg Barker MP, UK Minister of State for Climate Change, has said (see bit.ly/19YlI8W)
"There is the potential for solar power to become competitive with
fossil fuels without subsidy within the lifetime of this parliament [ie
before May 2015]". This trend is confirmed by other sources of evidence.
When that tipping point is reached, there is likely to be explosive growth in solar power. The cost of other renewables is also falling.

In view of the falling cost of renewables, the proposed
"contracts for difference" for nuclear power is likely to be a permanent
large subsidy for nuclear power throughout the proposed 35 years of the
contract.

Renewable sources of power provide three times as many jobs as nuclear power (See “Over 3 Times More Green Jobs Per $1 Invested Than Fossil Fuel Or Nuclear Jobs”, CleanTechnica, 2013-03-20, bit.ly/1yoIHuE.) and many of them require high level qualifications and skills.

There are many acceptable options for siting wind and solar
power plants, including wind farms out at sea (where costs are coming
down), and solar plants on factory roofs and in association with roads
and railways. There is also great potential for importing solar power
from southern Europe and beyond, and wind power from Ireland or
continental Europe.

In addition, renewables, with conservation of energy:

Provide more flexibility than nuclear power;

Provide diversity in energy supplies;

Are largely free of the several problems with nuclear power (see bit.ly/1bScDSg),
including the significant risk of nuclear disaster and the
still-unsolved problem of what to do with long-lived nuclear waste.

Subsidies for nuclear power have the effect of diverting
resources away from technologies which are cheaper than nuclear power
and altogether more effective as a means of meeting our energy needs and
cutting emissions.

In terms of competition within the EU, state aid for nuclear
power in the UK is entirely at odds with the coming single market for
electricity in the EU and with the principle that there should be free
movement of goods and services throughout the region. It is bad for the
development, throughout Europe, of the good, effective
alternatives—renewables with conservation of energy—which are ready to
go, cheaper than nuclear power, and very much quicker to build.

Please ensure that there is no state aid for the proposed new
nuclear plant at Hinkley Point, and likewise for any other proposed new
nuclear plant in the UK or elsewhere in Europe. And please review all
subsidies for existing nuclear plants throughout Europe.